Brookfield Asset Management Inc is buying majority of stakes in Oaktree Capital Management in a deal worth roughly $4.8 billion, a move which will result in creation of an alternative-asset manager that will rival the industry giant like Blackstone Group, said the asset manager on Monday.
Oaktree came to the decision of selling most of its stakes, led by one of its upset investors and also its co-chairman Howard Marks, after continuously facing underperformance of its share in the larger market, as in past five years its shares dipped by nearly 13 percent, compared to rise of over 50 percent in S&P 500 Index and 4 percent in share price of Blackstone during the same period.
It was the during fall season when Oaktree was approached by the Brookfield for its buy out plans, a person familiar with the matter said.
In the recent years, after the acquisition of Fortress Investment Group in 2017 by by Japan’s SoftBank Group Corp for about $3.3 billion, the current Oaktree deal will be the second when a U.S. alternative-asset manager sold it.
Brookfield currently focuses on real estate, renewable energy, private equity and infrastructure, but with current deal it is betting on its prospects for making investments in debt, as 70 percent of the Oaktree’s assets under management comprise of debt.
Once completed successfully, the combined businesses will be managing about $475 billion of assets, including debt, Brookfield said.
As part of deal, shareholders of Oaktree will be allowed to either exchange their shares for $49 in cash for each share they hold or get 1.0770 Class A shares of Brookfield against the same. Half of the deal’s amount will be paid in stocks by Brookfield whereas remaining amount will be paid in cash, Brookfield said.
After the acquisition, both asset managers will continue to be working as separate businesses while co-chairman of Oaktree, Marks will join the board of directors at Brookfield.